Prediction markets generated more than $82 billion in trading volume in September, but growth trailed traditional sportsbooks when measured on a more comparable basis, according to research from Stifel.
Of that total, $76.7 billion came from federally regulated prediction markets, up 64% from August. But using a measure more closely resembling sportsbook handle, Stifel estimated trading grew 27%, compared with a 43% month-over-month increase in regulated sports betting handle in states that have reported results so far.
Stifel said the slower growth could signal earlier-than-expected market saturation and customer turnover, despite companies like Kalshi and Polymarket spending heavy on user acquisition and product improvements.
Prediction markets driven by sports, parlays
Sports continued to dominate prediction-market trading in September. Single-event sports contracts generated $22.8 billion, up 23% from August, while combination contracts, or parlays, more than doubled to $41.6 billion.
Together, sports and parlays accounted for 83% of Kalshi’s trading volume.
Notional volume can overstate betting activity, particularly in parlay markets, where contracts purchased for pennies can count as $1 in reported volume. That can make trading volume appear significantly larger than the amount customers actually wager, complicating comparisons with traditional sportsbook handle.
Stifel estimated taker-only volume across CFTC-regulated exchanges at $17.7 billion, based on trading patterns at Kalshi and Polymarket US. The measure more closely resembles sportsbook handle, though it can still count transactions made when traders exit positions.
Kalshi’s share of regulated prediction-market volume fell to 79% from 86% in August as competitors gained ground.
Improving sportsbook trends
The findings come as traditional sports betting show signs of renewed growth. U.S. sports betting handle increased an estimated 4% year over year in September across 13 reporting states, despite one fewer week of NFL games than last year. Gross gaming revenue fell 9% as game results largely favored bettors.
FanDuel continued gaining sportsbook handle share, while DraftKings showed improving online casino market share, Stifel said.
The firm maintained its positive long-term outlook for sportsbook operators but warned that increased investment in prediction markets could weigh on near-term earnings.
“We maintain our positive long-term sector thesis on mis-priced predictions net impact and early signs of OSB handle re-acceleration, though near-term taking a cautious view into Q3 earnings given potential step-up in PM investment.”
DraftKings could accelerate some of its planned prediction-market spending into 2026, while Fanatics has indicated it could nearly triple marketing spending next year.
Trading volume under scrutiny
Questions about reported trading volume have also attracted scrutiny. The Wall Street Journal reported Saturday that $108 million out of $167 million in transactions on FIFA’s World Cup prediction market partner ADI Predictstreet came from interconnected cryptocurrency accounts apparently linked to the platform.
Meanwhile, Stifel noted that several exchanges, including Kalshi and DraftKings’ DKeX, have recently scaled back trading incentives as market liquidity improves. The firm sees the changes as a sign that exchanges are attracting sufficient trading activity without offering the same financial incentives to market makers.
Investors will be looking for more clarity on how prediction-market competition and increased spending are affecting sportsbook growth and profitability when major operators report third-quarter earnings in the coming weeks.
